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Unemployment and Inflation Relationship

Question

Analyse how lower unemployment may cause inflation.

Category:

Economic Problems

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Preview Answer

I. 🍃Introduction
- Explanation of the relationship between employment and inflation

II. More people in work
- Explanation of how more people in work can lead to higher incomes and purchasing power
- Discussion of how this can increase spending and aggregate demand

III. Demand-pull inflation
- Explanation of how an increase in aggregate demand without a corresponding increase in supply can lead to inflation
- Discussion of the potential consequences of demand-pull inflation

IV. Shortage of workers
- Explanation of how a shortage of workers can lead to higher wages
- Discussion of how higher wages can increase the average cost of production

V. Cost-push inflation
- Explanation of how an increase in the average cost of production can lead to inflation
- Discussion of the potential consequences of cost-push inflation

VI. 👉Conclusion
- Summary of the main points
- Discussion of the importance of understanding the relationship between employment and inflation.

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